An economist warns that Malaysia's fuel subsidy rationalization plan could unfairly impact middle-income families (M40). He urges the government to consider additional factors like household size and regional cost of living to ensure the program benefits those most in need.
An economist has cautioned that rationalizing Malaysia 's fuel subsidy system solely based on income could unfairly disadvantage families in the M40 middle-income group unless the country's structural economic challenges are fully taken into account.
Mohamad Idham Md Razak, a senior lecturer at the Universiti Teknologi Mara's business management faculty, stated that while redirecting finite government resources away from higher-income groups to benefit lower-income B40 households is theoretically beneficial, there's a risk of disproportionately impacting the M40. Idham explained that many M40 families rely on essential assets like a modest home and a car for economic participation. He expressed concern that under the proposed framework, these households, already burdened by the high cost of living and substantial debt, could be wrongly categorized as ineligible for subsidies, effectively reducing their disposable income and creating a new 'squeezed middle'. Idham emphasized the need to incorporate additional factors into the rationalization exercise, such as household size, number of dependents, and regional cost-of-living variations. He argued that this would enhance both the fairness and effectiveness of the subsidy program. From an efficiency perspective, targeting subsidies to those with the highest marginal utility for the money ensures that resources reach those most in need. From an equity standpoint, acknowledging that a particular income level translates to vastly different living standards depending on factors like household size and location is crucial.While recognizing the added administrative complexity and cost associated with incorporating these factors, Idham stressed that it is the only path to achieving true distributive justice and preventing the unintended exclusion of vulnerable households that the policy aims to protect.
Fuel Subsidies M40 Income Inequality Malaysia Economic Policy
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